Legal & General’s new boss has announced a shake-up at the company, including a sharper focus on its booming pensions arm and putting its housebuilding business up for sale.
New insurance and asset management group CEO António Simões, a banker who started in January and previously worked for Santander and HSBC, promised a “simpler and better connected” business focused on the three divisions.
In his first major strategy announcement, Simões said the £14bn FTSE 100 company would double in the fast-growing market for corporate pension deals, in which companies pay insurers to take over their pension liabilities.
L&G, the UK’s largest provider of defined contribution pension schemes, aims to complete between £50bn and £65bn of deals in the UK by the end of 2028, up from a previous target of £40bn to £50bn. It approved £13.7bn worldwide last year, including £12bn in the UK.
Simões said this represented a significant opportunity as only 10% of the £6.6 trillion in defined pension assets in the UK, US, Canada and the Netherlands had so far been transferred to insurers.
He said the transfers represented a “repository of future profit”. “We need these reliable earnings in the coming years – we’re talking decades,” he added.
As part of the transformation, L&G will create one global asset management company and transfer Legal & General Capital, which invests in infrastructure and construction projects, to its traditional asset manager, Legal & General Investment Management (LGIM), including a new private markets division.
Michelle Scrimgeour will step down from her role as CEO of LGIM. The company is seeking a global CEO to lead a new, larger division.
The company aims to sell “non-strategic” assets, the biggest of which is housebuilder Cala Homes, along with older land and properties such as a shopping center in Bracknell, Berkshire. However, it will continue to invest in affordable homes, which Simões described as a “key strategic business”.
Notably, the announcement did not include the phrase “inclusive capitalism” often used by his predecessor Nigel Wilson, who invested in “socially useful” assets such as science parks, student accommodation and retirement housing. Simões insisted that a “deep sense of purpose” remained central to the strategy.
Despite the sweeping changes that analysts saw as positive, Simões said there would be no layoffs, but plans to “streamline” across the business, including using fewer cloud providers. “This is a growth plan and we are investing in the growth of the business, so there are no layoffs,” he said.
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The company said the changes aim to make the business sustainable in the long term even if pension transfers dry up.
L&G said it would return more than planned to shareholders in the coming years, with its first share buyback of £200m this year, along with a 5% increase in its dividend. This will be followed by 2% annual dividend growth until 2027 and further share buybacks.
The company’s stock price fell more than 5% on Wednesday.